If you are self-employed and doing very well at the time of divorce, child support could be set high. Due to the fickle nature of business or the entertainment world, you may be nervous about agreeing to a certain figure based on your current income, and rightly so because you could end up in real trouble if you can't keep up the payments. There are some ways you could look out for your future self and your children too.
Hire a Financial Expert or Accountant
One of the factors a judge will be looking at is the welfare of the children and making sure that their circumstances will be close to what they have been accustomed to, if possible.
To make sure there is a fair calculation of your current means, you may need the services of an accountant. It may be in your best interests to also hire a financial expert well-versed in the rhythms of your vocation to testify about the possibility of lowered income and opportunities for work. This would serve to protect you from inflated expectations/calculations of future prospects offered from the other side.
Consider Making a Lump Sum Payment
You can't "buy off" your child support obligation to your ex by offering a large monetary amount or giving them a significant asset. This is because the support actually belongs to the children and your ex is responsible to see that this is what it is used for. However, it may be to possible to pay the support in a lump sum if you can convince the court to agree to it. You may prefer this if you can afford to do it since you wouldn't have to worry about the hassle of making weekly or monthly payments.
Your ex may be happy to receive it in this way because they wouldn't have to worry about the uncertainty of regular payments, either. This does have its downside, however. The IRS may consider the payment as taxable income, especially if the ex burns through a large percentage of the money in a year or two. This possibility could also cause you some anxiety over the welfare of your children.
Additionally, an ex can ask for a modification of support to cover increased expenses of your children as they grow to cover inflation, increased education expenses and medical expenses, so you could end up paying more later.
Make a Revocable Trust That Distributes Regular Payments
You might consider taking a lump sum amount and putting it into a trust that makes regular support payments to your children. You could also put more money into it as time goes on to make sure it covers your child's needs. This would keep your ex from going through the money too fast and provide more distance between you and the ex, and it gives your kids a bit of financial security.
Handle 3rd Party Payments Yourself
You could elect to pay many of the children's expenses yourself and not include them in the figure that is paid to your ex for support. This would include school tuition, rent, medical bills, and more.
Some Important Facts to Keep in Mind
After the divorce, if you fall on hard times, it is essential to go back to court and request a support modification as soon as possible. If you let the support obligation fall behind and accumulate, you can't ask a judge to change the figure retroactively. You can't get the child support debt discharged in bankruptcy either.
You may be able to negotiate a lowered payment with an understanding ex, but it is still wise to get it officially modified in court to protect yourself. You will need to bring in adequate proof that your income has substantially changed and you are doing the best you can in light of the circumstances. If your ex has experienced a change in their circumstances for the better, their support obligation may increase while yours is made smaller.
For ideas and legal advice on your specific situation, you will need to consult a family law attorney.
